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Posted April 2025A few months ago, the Fifth Circuit addressed the “evergreen problem” of the parties’ failure “to establish the citizenship of limited liability companies in a diversity case under 28 U.S.C. § 1332.” Megalomedia Inc. v. Philadelphia Indem. Ins. Co., No. 23–20570 (Sept. 20, 2024). The court noted that it has “repeatedly held that the citizenship of an LLC is determined by the citizenship of its members. At the pleading stage, the party invoking the federal court’s jurisdiction must allege the citizenship of each LLC’s members.” Interestingly, the court also said that at the summary judgment stage, the party invoking the court’s jurisdiction must provide evidence sufficient to support a jury finding of citizenship of each of LLC’s members, and, at trial, that party must prove citizenship.
In Megalomedia, the complaints alleged “where the LLC parties were ‘doing business’ and had their ‘principal place of business,’” but these allegations were irrelevant to the citizenship of the LLCs’ members. Although there had been a trial, there was no record evidence establishing the LLCs’ citizenship, so the Fifth Circuit remanded the case for jurisdictional discovery.
Megalomedia reminded me of teaching Civ Pro. One of my favorite scenarios to include in a 1L Civ Pro midterm was a fact pattern with an LLC where the students had to figure out if a federal court had subject matter jurisdiction in a removed case. 1Ls generally understood that the citizenship of corporations is based on their state of incorporation and principal place of business under 28 U.S.C. § 1332(c)(1), but they tended to forget that the citizenship of LLCs, and other unincorporated entities, is different.
Megalomedia is an important reminder that it pays to know your Civ Pro on the front end rather than have the Fifth Circuit teach it on the back end. If you’re filing a case in or removing a case to federal court based on diversity jurisdiction, don’t forget that you need to properly allege the citizenship of the parties. For unincorporated entities, this means you need to research and plead the citizenship of each member of the entity. Although you may not be able to determine the citizenship of the members with certainty at the pleading stage, you should make an inquiry that is reasonable under the circumstances and plead the information you have. Similarly, if your client is sued in federal court or your case is removed and diversity jurisdiction is alleged, make sure the party invoking federal jurisdiction has properly plead the citizenship of the parties.
It may take some extra time and effort to determine the citizenship of an LLCs’ members on the front end, especially if the LLC has multiple members and one or more of those members is an LLC itself. But it will be worth the time and effort at the pleading stage to avoid a Civ Pro lesson on appeal.
